Abstract
It is always possible to modify by transactions on the market the initial legal delimitation of rights. And, of course, if such market transactions are costless, such a rearrangement of rights will always take place if it would lead to an increase in the value of production (Coase 1960: 15).
Is this statement profound, trivial, a tautology, false, revolutionary, wicked? Each of these has been claimed. A version was named the ‘Coase theorem’ by Stigler (1966: 113) and the accolade has undoubtedly helped publicize some of Coase’s ideas. Indeed, Coase’s 1960 article in which the approach is most fully developed, ‘The Problem of Social Cost’ (henceforth PSC), appears to have been cited more often between 1981 and 1996 than any other paper written by an economist (statistical tests excepted). Yet the word ‘theorem’ evokes a mathematical style which is alien to Coase’s taste and may have done a disservice in diverting attention from his broader message. It has also lured commentators into crude misrepresentation. As Coase rightly complains, ‘The world of zero transaction costs has often been described as a Coasian world.
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de Meza, D. (2002). Coase Theorem. In: Newman, P. (eds) The New Palgrave Dictionary of Economics and the Law. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-74173-1_57
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